Chapter 21

Study of CCI Order in Google Incs Abuse of Dominance

(Mr. Shubham Tripathi & Mr. Ashwani Singh)

Introduction

The Competition Commission had ordered probe against Google in four different cases for alleged
abuse of dominant position. CCI had directed its Director General (DG) to investigate these cases
under the provisions of the Competition Act in two cases filed by Consim Info Pvt Ltd and
Consumer Unity & Trust Society, both against Google Inc and Google India Pvt Ltd; a combined
investigation report has been submitted by DG, CCI. DG is the investigation arm of the regulator
and cases are referred to it by the Commission when there is prima-facie evidence of violations.

The CCI has the power to impose the highest economic penalties in India. In case of contravention
of section 4 of the Act, the CCI is empowered to levy a penalty of up to 10 per cent of the average
turnover of the enterprise for the preceding three financial years or direct the division of a dominant
enterprise. However, as there are no guidelines issued by the CCI in relation to the determination
of penalties, the CCI currently has absolute discretion in relation to the imposition of a penalty.
The CCI further clarified that in case of any non-compliance with the directions of the director
general in future; each instance of non-compliance would be taken separately as an aggravating
factor for the imposition of a fine.

ABUSE OF DOMINANCE -

Dominance is not considered bad per se but its abuse is. Abuse is stated to occur when an enterprise
or a group of enterprises uses its dominant position in the relevant market in an exclusionary or/
and an exploitative manner.

Abuse of dominance is judged in terms of the specified types of acts committed by a dominant
enterprise. Such acts are prohibited under the law. Any abuse of the type specified in the Act by a
dominant firm shall stand prohibited.

Section 4 (2) of the Act specifies the following practices by a dominant enterprises or group of
enterprises as abuses:

Directly or indirectly imposing unfair or discriminatory condition in purchase or sale of

goods or service;
 Directly or indirectly imposing unfair or discriminatory price in purchase or sale
(including predatory price) of goods or service;

Limiting or restricting production of goods or provision of services or market;

Limiting or restricting technical or scientific development relating to goods or services to

the prejudice of consumers;

Denying market access in any manner;

Making conclusion of contracts subject to acceptance by other parties of supplementary

obligations which, by their nature or according to commercial usage, have no connection
with the subject of such contracts;

Using its dominant position in one relevant market to enter into, or protect, other relevant
market.

Background

The Competition Commission of India (CCI/Commission) passed an order on March 26, 2014
imposing a fine of Rs. 10 Million on Google USA and Google India (Google) as they had failed
to cooperate with the Director General (DG) in relation to an investigation (CCI Order). The
DG was acting pursuant to information filed by Consim Info Private Limited and Consumer Unity
& Trust Society (Informants).

The present ruling is only confined to imposition of penalty due to a partys failure to comply with
directions of the DG under Section 43 of the Competition Act, 2002 (Competition Act). Google
will have to comply with the directions of the DG and submit the relevant information. After
completion of investigation, CCI will examine whether there is a violation of Section 3 and Section
4 of the Competition Act.

Facts

Cases filed by the informant alleging that Google enjoyed a dominant position and was conducting
its business in a manner that was discriminatory, by manipulating algorithms and was causing
harm to advertisers and indirectly consumers. It was further alleged that by using a number of
vertical services such as Youtube, Google News, Google Maps etc., it mixed many vertical results
into generic search results. Informants contended manipulation in search results and that there was
also denial of access and creation of entry barriers for competing search engines etc. CCI
concluded that prima facie Googles had abused its dominant position and that a case had been
made within the meaning of Section 26 (1) of the Competition Act. Consequently, DG was directed
to carry out investigation in respect of Case No. 7 of 2012 and Case No. 30 of 2012.
Show Cause Notice against Googles Failure in Compliance

During investigations DG sought information through several notices in respect of which DG

contended that Google did not comply. Due to Googles failure to comply with the notices, DG
reported the matter to CCI. It is important to note that CCI has taken a serious note of the conduct
of Google and observed that Google showed an attitude of either withholding the information or
furnishing only a part of the information sought. On account of this, CCI inferred that there was
a willful disregard on the part of Google to comply with the information requests of DG. CCI
issued a show cause notice to Google as to why measures under Section 43 of the Competition Act
should not be taken against Google (Show Cause Notice). Section 43 of the Competition Act
provides that if a person to whom directions have been issued, either by CCI or the DG, fails to
comply with such directions, CCI may impose a fine of up to Rs. 1 Lakh per day of continuing
non-compliance subject to a maximum of Rs. 10 Million.

Arguments in the Proceeding under Section 43

The issue before CCI was confined solely to Googles compliance with the Show Cause Notice
and not the substantive issues in the cases filed. In its defence, Google contended that Google there
wasnt unreasonable delay on its part. Google sought to substantiate its bona fides by
demonstrating that it had in fact cooperated with the DG. On the substantial queries raised by the
DG, Google contended that the queries raised by DG were quite complex, broadly-worded,
reaching into several commercial aspects/transactions and hence these required time to obtain
information. Google contended that in neither case, a timeline of alleged violations was indicated
and consequently, Google was required to obtain information for an undefined period and the
investigation was open-ended and that the investigation expanded over time and covered every
facet of Googles business. Google provided a timeline setting out the sequence of events to
demonstrate that it had been cooperating with DG. While some delay was acknowledged, it was
contended that this was unintentional and only for the purpose of ensuring that complete
information was submitted. Google also sought to allay CCIs apprehensions that it was
withholding any information at all and in fact was taking all measures possible to furnish
information and cooperate with DG. Google also addressed CCI on issues of law and submitted
that for the purpose of exercising jurisdiction under Section 43 of the Competition Act, there
should have been non-compliance and not belated disclosure, relying on Kingfisher Airlines
Limited v. Competition Commission of India & Ors. Google also contended that the Supreme Court
had recognized the principle that penalty was to be imposed only in cases of deliberate non-
compliance. Factually, Google sought to corroborate its contentions with the various submissions
and information provided by Google. Google also placed reliance on Section 43 of the Competition
Act and contended that the provision itself contemplated reasonable cause and hence CCI ought
to determine with the delay in submission by Google was with cause or without cause.

CCI Order in The Case

CCI identified following broad topics on which DG had requested information:

Information related to algorithmic changes CCI concluded that as on 15.01.2014, Google

had not yet supplied information relating to algorithmic changes;

Non-submission of agreements CCI concluded that in spite of extensions, Google did not
supply the requisite information;

Non-submission of documents relating to Octathorpe and Adsense Account CCI

concluded that Google had not submitted complete documents relating to the query raised
by DG;

Non-submission of documents relating to termination/suspension of tech-support Adword

accounts CCI concluded that Google did not submit complete documents, although some
documents were indeed filed;

Non-furnishing of information pursuant to depositions CCI concluded that Google failed

to produce documents after making oral depositions. CCI noted that Google neither sought
additional time nor made any communication.

Analysis Report

Response to show cause notices requires extreme care. It is imperative for companies to ensure
satisfactory compliance while responding to show cause notices (See Nishith Desai Associates
article on responding to show cause notices) in form and substance. Although from Googles
contentions it would seem that Google did all that it could reasonably be expected to, it would
seem that CCI has unfairly drawn an adverse inference against the belated submission / non-
submission. The rejection of Googles argument that a distinction should be made between wilful
default and belated submissions would seem harsh. CCI has also not provided any rationale on the
basis of which the maximum amount of Rs. 10 Million has been imposed, particularly, when CCI
notes that Googles submission of some information was in fact a mitigating circumstance.

CCI has shown willingness to exercise all powers that it may have to ensure objectives of CCI are
fulfilled. Consequently, companies should take notices from CCI (and for that matter, any sectoral
regulator) extremely seriously as the consequences of non-compliance can be quite drastic. Google
has the right to appeal under Section 53B of the Competition Act. Given the adverse inferences
drawn, Google may be tempted to challenge the CCI Order. For its part, we can expect CCI to get
stricter with other companies and not hesitate to impose fine under the Competition Act.
Imposition of fines and drawing adverse inferences are harsh measures and it would be reasonable
to expect that CCI comes out with guidelines on imposing fines.